Vimto manufacturer Nichols PLC says it fears a hit to profits as a consequence of the Saudi Arabian and UAE authorities introducing a 50% tax on all non-carbonated drinks.
Nichols plc, which is based in Merseyside , said group sales in 2019 are expected to be around 4% ahead of last year - in line with market expectations.
But in a trading update released on Monday, the firm warned its 2020 pretax profit could be "materially below current expectations" due to the excise tax on non-carbonated sweetened drinks by the authorities in the Middle Eastern countries.
Shares in the firm, based in Newton-le-Willows, had slumped by almost 15% at 9.30am on Monday after the statement, which added: "We have to assume the increased retail price will have a negative impact from 2020.
"In order to mitigate the impact, we are currently developing plans in collaboration with our long term in-market partner which will require increased investment in the Vimto brand to maintain its strong market position."
The statement from the company, which sells products including Vimto in over 85 countries, said it was "pleased" with the 4% rise "given the slowdown in the UK soft drinks market and the challenging broader consumer environment". It said the year had been positive for the firm - both in the UK and internationally.
But Nichols plc said the impact of the new tax on sales in the Middle East will not be known until after the three-month Ramadan trading period - which accounts for around 80% of annual in-country revenues.
"Whilst there is a broad range of possible outcomes, we believe the impact of the tax could be material to the Group and may result in Profit Before Tax for FY20 being materially below current expectations."
The Saudi government has had a 50% sugar tax on soft and energy drinks - but from December 1 this year, that tax will now apply to concentrated syrups such as squash - including Vimto.
The statement, which said a further trading update would be issued next month, added: "The company’s annual sales of concentrate to the Saudi and UAE markets is c.£7.0m and the Middle East as a whole, remains a key strategic market for the Vimto brand. In addition, the Group remains highly profitable and cash generative, allowing continued investment in our future growth plans."
